An Open Letter to the "Overhead Myth" Authors

Dear Art, Jacob, and Ken,

I write to congratulate you and to thank you for your efforts to help deal with the Overhead Myth issue that complicates the larger public environment in which philanthropy and nonprofits operate. At the Indiana University Lilly Family School of Philanthropy, we are pleased to be a partner with you in helping create better understanding among funders and donors of the true indicators of successful outcomes in philanthropy.

Overhead and fundraising costs have been key challenges for nonprofit organizations for the past 20 years and more. It has been my own personal soapbox issue and that of many others who have tried to improve understanding and funding of these costs over the years, including through research, such as in our study conducted with the Urban Institute that included an entire website dedicated to helping educate the public.

Donors and funders today want nonprofit organizations to do thoughtful planning, deliver effective programs through excellent management, and conduct effective fundraising and thorough evaluation. These are all overhead costs and are essential investments for effective, high-performing organizations. Yet all of these activities are too often bundled without reflection or thoughtful discussion into cost ratios that are easy to calculate and that obscure and oversimplify understanding of the legitimate needs and costs of nonprofit organizations.

In a world where data is increasingly available, your organizations are increasingly important to helping donors and funders understand better the dynamics of the strategic and effective philanthropy that many of them seek. Those of us who help donors and nonprofit executives understand these issues have an ethical responsibility to get organizations to focus on accountability, transparency, and trust building. It is only through a high level of trust in what we all do that we can hope to sustain philanthropy. It is only through demonstrated organizational effectiveness that we can hope to expand philanthropy and make it a more powerful force in our society.

All of us who have been working seriously to create better understanding of the important characteristics of high-performing and effective nonprofit organizations welcome you as partners in educating donors, funders, and nonprofit executives about the best ways to measure the effectiveness of their contributions, grants, and work, instead of merely falling back on one measure of operational efficiency that over simplifies the complexity of high-performing nonprofit organizations.

Best wishes for success with your efforts. Please let us know if we can be helpful.